Bank of Canada raises key rate by half a point amid high inflation
OTTAWA, ON – In an unprecedented move, the Bank of Canada has announced a major increase to its key interest rate for the second time in two months, as it forecasts higher consumer prices to come this year.
The central bank increased its policy rate by half a percentage point, to 1.5 per cent Wednesday, and warned that rates will need to rise further to rein in inflation.
Russia’s invasion of Ukraine, COVID-19 lockdowns in China and backlogged supply chains are fuelling “uncertainty” and higher prices for energy and food, the institution said. Those global pressures, along with low unemployment rates at home, will likely push inflation well past the bank’s previously projected rate of nearly six per cent for the first half of the year.
“The risk of elevated inflation becoming entrenched has risen,” the institution said in a release accompanying the rate announcement.